Foreclosure

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FORECLOSURE is the legal means that your lender can use to repossess (take) your home. When this happens, you must move out of your house or be evicted. If your property is worth less than the total amount you owe on your mortgage loan, your lender could seek a deficiency judgment. If that happens, you not only lose your home, you also would owe your lender an additional debt - the difference in what you owe vs the amount the home was sold for.

Foreclosure or a deficiency judgment could seriously affect your ability to qualify for credit in the future. So you should avoid it if all possible!

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In the Event of a FORECLOSURE NOTICE 

  1. Do not ignore the letters from your lender. If you are having problems making your payments, contact your lender immediately. Explain your situation. Be prepared to provide them with financial information, such as your monthly income and expenses. Without this information, they may not be able to help.

  2. Stay in your home for now. You may not qualify for assistance if you abandon your property.

  3. Contact a HUD-approved housing counseling agency. They have information on services and programs that could help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.

  4. If you bought your home with a Veterans Administration (VA) guaranteed loan, call the VA office nearest you and see VETERAN'S CENTER GUIDE

FORECLOSURE ALTERNATIVES

Special forbearance. Your lender may be able to arrange a repayment plan based on your financial situation. Your lender may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently lost your job or your source of income or if you had an unexpected increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.

Mortgage Modification  You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem but your net income is less than it was before the default (your failure to pay).

Partial claim. Your lender may be able to work with you to obtain an interest-free loan from HUD to bring your mortgage current.

You may qualify if:

  1. your loan is at least 4 months delinquent but no more than 12 months delinquent;

  2. your mortgage is not in foreclosure; and

  3. you are able to begin making full mortgage payments.

When your lender files a Partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must execute a promissory note, and a Lien will be placed on your property until the promissory note is paid in full. The promissory note is interest-free and will be due if you sell or leave your property, or when your mortgage matures.

Pre-foreclosure sale. This may allow you to sell your property and pay off your mortgage loan to avoid foreclosure and damage to your credit rating.

You may qualify if:

  1. the "as is" appraised value is at least 70% of the amount you owe and the sales price is 95% of the appraised value;

  2. the loan is at least 2 months delinquent prior to the pre- foreclosure sale closing date; and

  3. you are able to sell your house within 3 to 5 months (depending on what your lender agrees to).

  4. An additional benefit to this option is the assistance you will receive with the Seller-paid closing costs. *Typical

Deed-in-lieu of foreclosure. The final option you may be able to voluntarily "give back" your property to the lender. This won't save your house, but it will help your chances of getting another mortgage loan in the future.

QUALIFYING: A housing counseling agency can help you determine which, if any, of these options may meet your needs. You should also discuss the situation with your lender.

FORECLOSURE

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